The nation’s homeownership rate continues on an eight-year slide, down to 63.7 percent in the first quarter of this year from a peak of over 69 percent in 2004, according to a new report by Harvard University’s Joint Center for Housing Studies.
Meanwhile, rentals are booming as is the cost of living in rental units. On average, the number of new rental households has increased by 770,000 annually since 2004, the center’s report said. This makes the time period of 2004-2014 the strongest 10-year streak of rental growth since the late 1980s.
The other downside in the surge in rental demand is the national vacancy rate, which fell to its lowest point in nearly 20 years. Because of the limited supply of rental units, rents rose at a 3.2 percent rate last year — twice the pace of overall inflation.
Many people living in rentals were previous home owners who lost their homes to foreclosure and now have such damaged credit reports that they find it nearly impossible to qualify for a mortgage. Others cannot move out of rentals because lenders have so tightened credit standards after the abuses of the housing bubble that getting a mortgage is nearly impossible.
The federal government has created programs to encourage lenders to offer mortgages requiring only a small down payment, but those efforts have failed to make a significant difference in the trends outlined in the report by the Joint Center for Housing Studies.
“In fact, the national homeownership rate remains as high as it is only because the baby boomers (born 1946–64) are now in the 50-plus age groups when homeownership rates are high, and because owners aged 65 and over have sustained historically high rates,” the report states. “In sharp contrast, it was generation X (also known
as the baby bust, born 1965–84) that took most of the hit from the housing bust.”
Just before the housing crash of 2007-2008, younger gen-Xers were in their prime first-time homebuying years, while older members of this generation were at the stage when households tend to trade up or make significant improvements to their existing homes, the report states.
“Perhaps the most telling indicator of the state of the nation’s housing is the drop in the homeownership rate to just 64.5 percent last year,” says Chris Herbert, managing director of the Joint Center for Housing Studies. “This erases nearly all of the increase from the previous two decades. In fact, the number of homeowners fell for the eighth straight year, and the trend does not appear to be abating.”
Read the full report from Harvard University’s Joint Center for Housing Studies.